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Capabilities, Proactive CSR and Financial Performance in SMEs: Empirical Evidence from an Australian Manufacturing Industry Sector

Torugsa, A, O'Donohue, W and Hecker, R 2011 , 'Capabilities, Proactive CSR and Financial Performance in SMEs: Empirical Evidence from an Australian Manufacturing Industry Sector' , Journal of Business Ethics .

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Proactive corporate social responsibility (CSR)
involves business strategies and practices adopted voluntarily
by firms that go beyond regulatory requirements in
order to manage their social responsibilities, and thereby
contribute broadly and positively to society. Proactive CSR
has been less researched in small and medium enterprises
(SMEs) compared to large firms; and, whether SMEs are
ideally placed to gain competitive advantage through such
activity therefore remains a point of debate. This study
examines empirically the association between three specified
capabilities (shared vision, stakeholder management
and strategic proactivity), proactive CSR and financial
performance in SMEs. Using quantitative data collected
from a sample of 171 SMEs in the machinery and equipment
sector of the Australian manufacturing industry, we
find that all specified capabilities are positively associated
with adoption of proactive CSR by SMEs, and that proactive
CSR is, in turn, associated with an improvement in
firm financial performance. Evidence of a fully mediating
role for proactive CSR on the association between capabilities
and financial performance presented in this study
aligns with RBV theory that suggests adoption of valuecreating
strategies that make the most effective use of a
firm’s capabilities is essential to financial success. The
study contributes to the CSR literature by demonstrating a
case for SMEs being able to maximise financial returns
whilst proactively making progress towards CSR.

Item Type: Article
Authors/Creators:Torugsa, A and O'Donohue, W and Hecker, R
Journal or Publication Title: Journal of Business Ethics
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